Here in this post i have tried explain the Medical allowance/Reimbursement payment & Exemption process.

First of all we need to understand the terms Medical Allowance, Medical Reimbursement & Medical Insurance and their tax aspects.

Medical Allowance: The medical allowance is part of any employees CTC, defined by employer and most imp. Medical allowance is taxable

Medical Reimbursement: Medical reimbursements are the actual amount that the employer’s gives to an employee when they submit bills for medical treatment availed for the financial year.

Medical reimbursements are exempt from taxes till the limit defined by the IT Act, which is Rs. 15,000

Medical Insurance: Don’t get confused with Medical Insurance, that is completely a different product. So do not compare it with Medical Allowance or Medical Reimbursement. Employee will get separate rebate under section 80D for Medical Insurance.

Process to claim Medical Reimbursement:

Case 1: Some employers provide medical reimbursements to the employees . In this case employee can submit the bills for the medical expenses and claim the benefits. These bills can be submitted quarterly, half-yearly or annually.

Case 2: Many of the employers pay the medical allowance of Rs. 15,000 as a part of the monthly salary. In such cases employees just need to submit the bills to the employers to get rebate upto 15000 per FY.

Example: Employee is getting 1250 rs. per month as allowance as part of his salary. He falls ill and gone under hospital treatment for 5000 rs. So he will submit the treatment bills to employer for rs. 5000 and will get rebate on it.

Total medical allowance = 1250*12 = 15000

Bills = 5000

Taxable amount = 15000-5000 = 10000

Now we will see how this process take place in SAP_

Ultimately there are two parts PAYMENT & EXEMPTION

Payment: You can make the payments for Medical Reimbursement through the IT-0008/0014/0015/0267

Exemption: The MDA subtype of the Exemptions infotype (0582) stores the details of the bills submitted as proofs for medical exemptions.